In today's investment environment, investment managers or fund managers who represent, for example, institutional investors have to demonstrate to those institutional investors that their records agree with the records maintained by the custodians of the institutions' investment assets, such as the institutional investors' banks. For example, a fund manager acting on behalf of an investor or client buys and sells securities, and those same securities are safe-kept with custodians, such as banks. The fund manager and the custodian each maintains its own books and records, and the securities and cash balances and transactions among those different books and records must be regularly and periodically reconciled.
Typically, the process of reconciling the different books and records is an entirely manual procedure which is performed by the fund manager. The fund manager receives paper statements from the custodian, and the fund manager generally deals with many different custodians. The fund manager pulls a report from its own internal portfolio tracking system and typically performs an “eyeball” scan, such as one hundred shares of IBM on the fund manager's record and one hundred shares of IBM on the custodian's record. The process continues in the same way, for example, for position after position, transaction after transaction, cash item after cash item, and for client after client, until completed.
Such a manual process is extremely tedious and time consuming. Fund managers typically dedicate from two persons up to as many as forty-five persons to this manual process, depending upon how many clients a particular fund manager has. The manual process is error prone and provides no value whatsoever to the business of the fund managers. Most fund managers express a preference to outsource the reconciliation process, if a reliable outsource facility existed.